SaaS-Based Budget Planning —Advantages over Traditional Models Tom Olson

SaaS-Based Budget Planning
—Advantages over Traditional Models
Author: Tom Olson
Tom Olson is President and CEO of MyBudgetFile Inc. and former Associate Superintendent of
Business and Finance for the Parkland School, Division No. 70, Stony Plain, Alberta, Canada.
SaaS-Based Budget Planning
-Advantages over Traditional Models
MyBudgetFile Inc. has been a
pioneer in SaaS. Since 2001,
it’s been our primary delivery
model, long before the SaaS
acronym even existed.
Large companies have always reaped the benefits of purpose-built
budgeting, planning and reporting applications; while mid-sized
organizations have had to rely on readily-available, inexpensive and
easy-to-use applications like the spreadsheet. While spreadsheets are
good desktop personal productivity tools, they are not collaborative
planning applications. The good news is that there is an excellent
alternative available to both models today.
Software as a Service (SaaS) is the most powerful and exciting
development in enterprise software in over a decade. SaaS solutions
solve many of the problems that have long plagued traditional
enterprise software offerings, such as large upfront license fees, long
implementation periods, complicated upgrades, and poor support.
Fundamentally, the SaaS model simply provides better value to
Understanding SaaS
SaaS is a software delivery model in which software and its associated
data are hosted centrally (typically in the Internet cloud) and are
accessed by users using a thin client, normally a web browser over
the Internet.
In its simplest form, SaaS is web-based software delivered on demand
and paid for on a subscription basis. The end-user need not maintain
specific hardware or load software to run the application; all that
is necessary is access to the Internet. SaaS eliminates the need for
individual organizations to buy, deploy, and maintain IT infrastructure
or application software.
SaaS eliminates the need for
school districts to buy, deploy,
and maintain IT infrastructure
or application software.
SaaS solutions are often based on multi-tenancy architectures,
meaning a single instance of the software runs on a server
and can serve multiple client organizations (tenants). In a SaaS
implementation, the vendor takes care of the support, training,
infrastructure and security risks in exchange for recurring
subscription fees.
Therefore, total cost of ownership (TCO) is reduced, access is available
to any user who has been granted a log‐in and software updates
are available immediately to all users without the need to install
upgrades on the user’s computer.
SaaS can offer economies of scale and skill that
are not possible in traditional, on-premise deployments
SaaS has become a common delivery model for most
business applications, including accounting, budgeting,
collaboration, customer relationship management
(CRM), management information systems (MIS),
enterprise resource planning (ERP), invoicing, human
resource management (HRM), content management
(CM) and service desk management.
IT Models for Budgeting,
Planning, and Reporting
Organizations are increasingly shifting over from the
traditional budgeting software models to SaaS in order
to reduce TCO, accelerate the time-to-market and
minimize the overall implementation risks.
The three IT models available for budgeting, planning
and reporting are:
•Traditional Model- Enterprises own
the software application and the assoicated
infrastructure (hardware, network, staff, etc)
•Hosting Model- Enterprises own the
software application and outsource the
application to be hosted by a third party on
their infrastructure
•SaaS Model- Enterprises do not own either
the software or the infrastructure and they only
pay a subscription fee to the SaaS provider to
user the application
SaaS can offer economies of scale and skill that are
not possible in traditional, on-premise deployments.
Thus, organizations are increasingly turning to SaaS as
a faster, less expensive and less resource-intensive way
to deploy many types of business solutions.
Benefits of SaaS Based
Budget Planning over
Other Models
In recent years, the SaaS model has flourished
at an astounding pace because of the benefits
it offers to all types and all sizes of business. In
addition to the cost advantage, the SaaS model
offers numerous benefits over traditional licensed
software approaches including:
•Reduced Technology Risks. SaaS effectively
eliminates technology investment risk and leaves
no scope for additional hidden costs that usually
arise over traditional application life-cycles i.e.
ongoing support, maintenance costs or risks related
to user acceptance. Software upgrades are usually
cumbersome, starting from re-implementing
and testing the compatibility, functionality and
performance of the new configuration. With SaaS,
this costly and risky process is eliminated.
•Reduced Infrastructure Costs. SaaS applications
are hosted by the service providers, so customers
are not required to invest in expensive
infrastructure. SaaS vendors typically host the
application in their own data centers providing all
the maintenance, backups, upgrades and support
activities-with no customer IT or application
management hassle. By reducing the burden
of internal IT staff, SaaS helps school districts
to direct limited in-house IT resources towards
more business-orientated ventures.
In the SaaS model, the application is up and running
in a very short timescale.
•No Capital Outlay. Another reason for school districts
to move to a SaaS model is the switch from IT capital
expenditures (CapEx) to IT operational expenses (OpEx).
SaaS requires no capital outlay for enterprise-class
software purchases or upfront licensing costs. With SaaS,
you replace costly upfront licensing fees with smaller,
subscription-based pricing which are fixed, predictable
and easy-to-understand. This results in considerable
saving through precise financial planning savings. All
the burden of capital expenditures is also shifted to the
SaaS provider and it would be their responsibility to deal
with purchasing server equipment, maintaining data
centres, networking equipment and Internet hosting
fees. The main advantage of using OpEx to fundthe SaaS
service is that it represents a real cost of doing business
and the customers only pay for what they use through
subscription fees.
•Faster Deployments. In the SaaS model, the
application is up and running in a very short timescale.
Since the solution is delivered via the Internet; SaaS
completely eliminates installation and set-up at the
customer's end. This quick start experience and low
upfront costs makes it a very appealing model to a wide
range of organizations.
•Single Instance, Multi-Tenant Efficiency. SaaS
vendors architect their solutions for a one-to-many, or
multi-tenant mode, instead of building their solutions to
run as separate, individual instances for each customer
as done in the case of on-premise or dedicated hosted
solutions. This means that the cost of all software,
infrastructure and expertise is shared by a large number
of customers. This drastically improves implementation
speed and cost effectiveness over a standard model.
•Streamlines Use and Management. SaaS vendors
take responsibility for running and managing
everything: servers, operating system software,
databases, installation of updates, ongoing backups,
power and cooling, network access, data center space,
and more. This shifts the IT burden from the customer
to the solution vendor. There is no software to maintain
and upgrade. Automated upgrades to new versions of
applications and functionality mean that in-house IT
can focus on other projects and initiatives.
•Improves Reliability, Performance and Efficiency.
Being web based, budgets implemented with SaaS
are available anytime and anywhere that there is an
Internet connection. Multiple users can simultaneously
budget from multiple locations into one budget
file, seeing only the areas of the budget for which
they are responsible. Standards assigned at both an
organizational and project level, including the use of
budget templates, assure that there is consistency in
the finished product and best practices are enforced
throughout a portfolio.
How SaaS Affects TCO
Total Cost of Ownership (TCO) is used to calculate
the total cost of purchasing (or in the case of SaaS,
subscribing to) and operating a technology solution
over its useful life. TCO provides a construct to
evaluate technology costs that may not be reflected
in the initial pricing.
In the SaaS model, the vendor takes responsibility for
deploying and managing the infrastructure (servers,
operating system software, databases, data center
space, network access, power and cooling, etc.)
and processes (infrastructure patches/upgrades,
application patches/upgrades, backups, etc.)
required to run and manage the full solution. The
SaaS provider manages the access to the application,
including security, availability and performance;
freeing customers from software and hardware
Since SaaS vendors manage all of their customers
on a single instance of the software, they can
amortize infrastructure-related costs for thousands of
customers. This yields substantial economies of scale
and skill, and lowers the TCO for customers seeking to
deploy a corporate performance management (CPM)
The software literally evolves with you,
keeping pace with your organization, size and costs.
How SaaS Improves ROI
While TCO helps you to determine hidden costs of
a new technology solution, return on investment
(ROI) analysis helps to surface benefits that may not
be readily apparent, such as improved employee
productivity or increased customer satisfaction.
ROI assessments tend to be more subjective in nature
than TCO, because these indirect benefits are usually
harder to measure than direct costs. Direct costs
associated with SaaS are lower than other models:
•Implementation costs. SaaS implementation costs are
typically, significantly lower than those for on-premise
•Recurring costs. The basic recurring cost is the SaaS
subscription cost.
•Upgrade costs. SaaS solutions typically offer seamless,
automatic, frequent upgrades as part of the ongoing
subscription charge. Since these upgrades happen
more frequently and therefore, incrementally than
on-premise solutions, they typically have significantly
reduced testing and end user acceptance and training
Forrester Research has identified several key
considerations in determining the ROI of SaaS. They
created its Total Economic Impact (TEI) model to help
companies consider three fundamental aspects of
SaaS ROI2. These are: how your company will benefit
from SaaS, how your company will pay, both in hard
costs and resources, for SaaS; and lastly, how risks and
uncertainties can change the total impact of SaaS on
your business.
Firms that Forrester interviewed have identified
long-term benefits from SaaS using five-year
cost/benefit analyses. Forrester Research gives SaaS a
significant advantage in benefits3. Greater risks can be
found in on-premise implementations that originate
from deployment complexities, training needs, and
support issues, according to the research company
When considering your own ROI analysis, be sure to
include all the cost, benefit, flexibility and risk elements
associated with implementation, deployment, staff,
resources, and upgrades. And don’t forget that TCO
must be part of the overall ROI calculation!
Some Areas of
Concern for SaaS
While SaaS can be implemented rapidly and eliminates the infrastructure
and ongoing costs that traditional applications require, there are some
areas of concern that businesses must be aware of:
•Safety of Data. Security and privacy are concerns when you subscribe to SaaS. A
business has no idea how their SaaS service provider will secure their data and what
backup procedures their service provider will have in place. To ensure that your data
is well looked after, your business must ensure that your service provider writes down
exactly how your data will be secured, in the Service Level Agreement contract. Selecting
a well known SaaS vendor or a software service provider with a good reputation, will also
give you peace of mind.
•Reliability. Reliable SaaS vendors put safeguards in place to ensure near constant
availability of their applications. In addition, you should ask the vendor for full hardware
redundancy to avoid consequences from equipment failure, redundant power supplies
in the data center, scalable server farm to quickly meet a sudden increase in demand and
a highly qualified operations team that monitors the site 24x7.
•Loss of Control. In-house software applications give business owners a high degree
of control. When you use a SaaS solution, you turn much of that control over to a third
party provider. A SaaS provider has to be chosen wisely as there is an inherent risk of
losing valuable data if the vendor goes out of business. Ensure that your vendor has a
data backup process in place, and that this data can be exported in a format that is easily
•Internet Connectivity. One of the biggest drawbacks of SaaS is the fact that
employees can no longer work offline when SaaS software services are used. Most
organizations are trying to solve this problem by allowing their applications to continue
to work in a disconnected fashion for a period of time, but at some point you will need
to sync back up to the server. When considering a SaaS subscription, ask for a service
level agreement that guarantees a specific percentage of uptime.
Forrester Research Paper titled ‘Comparing The ROI Of SaaS Versus On-Premise Using Forrester’s TEI™ Approach’, by Ray Wang.
Forrester Research Paper titled ‘The ROI Of Software-As-A-Service’ by Liz Herbert and Jon Erickson
Make the Right Choice for
Your Organization
To find out how
A growing number of organizations are adopting SaaS IT
models, and all the market research available indicates that
this trend will continue. The benefits are many. Maintenance,
management and support requirements become the
responsibility of the SaaS provider. Costs associated with those
requirements are either reduced or eliminated. IT personnel
needs are eased up and growth can be more effectively
planned and managed. Vendor accountability (and ultimately
performance) is increased. These benefits and more, add up to
an attractive model for organizations who need optimised
software solutions for their budgeting, planning and reporting
can help your organization improve
its budget planning process, visit us
at or call
MyBudgetFile Inc.
Toll Free: 1-855-MBF-TALK
[email protected]
MyBudgetFile, Inc. is the leading provider of web-based
budgeting for K-12 education. Today, thousands of school
business and educational leaders in over 70 school districts
across North America count on to create
meaningful financial plans that support educational goals
using 21st century web-based technology, designed by
people who know school business.